What is Outcome Economy?

In the Outcome Economy, businesses will shift from only delivering goods or services to the only thing that matters to customers: provide them goods or services that solve their individual problem and have measurable results.

Understanding the customer through data

This will be very challenging for companies as it implies that they need to fully understand their customers and the context in which products and services are sold. Value based on output also means that sensor data needs to be constantly examined in real time. Those data streams will contain traces about usage patterns, runtimes and telemetry and help to get detailed analysis on the customer behaviour. This will allow to optimize the services and products, individualize them completely for the customer and find the right level of ressources to be used to obtain the optimal output. Design Thinking will also play a vital role as it allows to drill down to the customer needs, comprehend in which context goods and services are used and what kind of value this provides.

Less machines with more output

So imagine you as consumer won’t have a car anymore as ownership of the car is not important or a status symbol anymore. The only value you have is to get from one location to another and companies that specialize in providing you the right machines (cars, planes, helicopters) and services to accomplish this. Or companies like Bosch that in future won’t sell you a drilling machine, but will sell you the holes that you may want to drill. In industry, the value based impact will be tremendous as there will be less machines sold, but the output per machine will be higher than in the past as it will be used almost constantly.

There are prominent examples for outcome economy focussed businesses, e.g. in the farming sector. Companies like Trimble, JohnDeere, Claas or CNHi will more and more focus on providing their customers not only tractors but machines that deliver a certain output. And this in an interconnected way by predicting the precise mix of seed, fertilizers, temperature, soil structure, and timing in order to maximize crop yield at harvest.

Another often cited company that focusses on the output of customers is Rolls-Royce with its jet engine business. The company decided moving away from just building engines and reacting on failures to being an integrated product and service provider that owns the risk of their engines being on wing, means being utilized on planes. Of course there is a risk associated with this value based approach as Rolls-Royce needs to ensure that time on wing is maximized and shop visit costs are minimized. With a set of services like health monitoring of engines in real-time, predictive maintenance, and data analytics it seems the company successfully managed the change to an outcome and value based manufacturer.

IoT will be outcome based and shared risk

In summary, businesses will move to a more outcome based approach which postulates that they understand their customer needs much better than in the past. Data will play a dominant role and will become an asset in itself that transports real value for customers and providers. Data ownership will become increasingly important for all sides. Provider risks will increase with this value based approach because the risk shifts partly to them but so will the compensation. Outcome economy is not a something that we can choose to live in or not but something that inevitably is going to happen and change the way companies are doing business in future.

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